Postponement

Postponement is a business strategy which maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment. An example of this strategy is Dell Computers' build-to-order online store. One of the earliest references to the concept was in a paper by Zinn and Bowersox in the Journal of Business Logistics. They highlighted five types: Labelling, Packaging, Assembly, Manufacturing and Time postponements.

A successful example of postponement – delayed differentiation – is the use of “vanilla boxes”. Semi-finished computers are stored in advance of seeing the actual demand for the finished products. Upon seeing the demand, thus with no residual uncertainty – these “vanilla boxes” are finished by adding (or removing) components. The three key interrelated decisions are: (a) how many different types of vanilla boxes to stock, (b) in what quantities, and (c) how to finish to meet the order most effectively.

Postponement is a concept in supply chain management where the manufacturer produces a generic product, which can be modified at the later stages before the final transport to the customer. Take for example an umbrella manufacturer who does not know what the demand will be for different colored umbrellas. The manufacturer will manufacture all white umbrellas and dye them later when umbrellas are in season and it is easier to predict demand of each color of umbrella. This way the manufacturer can stock up on white umbrellas early with minimal labor costs, and be sure of the demand before they dedicate time and money into predicting the demand so far in the future.

Postponement has a rich history in terms of research conducted by hundreds of scientists. According to numerous logistics journals, Supply Chain Management books and articles, the postponement concept has three key dates in its development in the 20th century – 1950, 1965 and 1988.

Marketing theorist Alderson in 1950 was the first to create the concept of postponement. He stated that it could reduce costs from a marketing point of view by postponing to as late as possible the product differentiation. The theorist believes that the closer the product is to its consumer, the more differentiated it becomes due to changes in unique tastes and demands. In this situation, both the consumer and producer benefit, as there is less risk from uncertainty for a producer leaving the consumer satisfied with a product.

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